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Frequently Asked Questions:

Do I Have to Let Current HR Staff Go if I Use a PEO?

Does hiring a team of experts to help manage a portion of your business mean that internal staff should be terminated, or suffer a reduction in hours? Business owners and executives often feel that it does. This is an understandable concern, but rarely is it a justified one in the case of hiring a full-service HR firm.

Ask a group of 100 business owners, presidents or CEOs why they do what they do, and the answers will most likely be a version or combination of… “Passion to improve a product or process,” “Passion for innovation,” “Enjoy being the best in a particular field,” “To generate a profit,” “To improve the lives of employees and/or customers,” or “To be his/her own boss.” Such aspirations are what drive the economic engine of this country, and while the routes to achieving them vary widely, every business has a few things in common.

It is Inevitable… With People Come Problems

If a business has employees, that business has problems. Why? Because employees are people, and people have problems! What types of problems accompany being an employer? To name a few: Complying with an ever-changing array of employment regulations and laws. Implementing measures to protect the business from employer liability. Identifying and rectifying profit-robbing trends like employee turnover, rising employee benefit costs, employee litigation and increasing workers’ compensation premiums. Safety training. Efficiently and properly administering the hundreds of required transactional tasks that in no way drive revenue or create organizational value.

All businesses must solve these problems to remain healthy. How efficiently these problems are solved will directly affect an organization’s ability to achieve the aspirations mentioned earlier Generating a profit, focusing on their passions, or enriching the lives of others.

Keeping Your People, but Outsourcing the Problems

What is the best way to solve the problems above? Many business owners rely on an internal staff supported in some capacity by outsourced resources. Occasionally the internal staff dedicated to all things “HR” is a team of one, perhaps a long-time employee with vast institutional knowledge of the business. It may also be a team of multiple employees, some of whom may be long-time organizational contributors, while others are recent hires. Regardless of the decided structure, all of these employees bring value to the business. If each person did not, his or her employment would be short-lived, and replacing that employee with an outsourced HR partner would be of no concern.

However, because these employees do add value to a business, the last thing a good HR partner wants is to displace them. The entire goal of a full-service HR firm is to provide a current functional HR staff with the tools necessary to do its job better, not to replace existing staff.

Consolidating Vendors

Before taking advantage of a PEO’s solutions, the average employer tries to solve his/her HR problems by relying on one, two or maybe three employees. Their HR staff wears “many hats,” some of which had nothing to do with HR. As a result, these 1-3 employees are familiar with many aspects of the business, but experts in none. Company policy, progressive discipline, employee benefit strategy, and other overarching business principles that create corporate culture are largely reactionary in nature. Usually, the designated HR team (or person) spends an inordinate amount of time on recurring transactional tasks that do nothing to drive revenue or better the company’s foothold in the marketplace. The business’s internal staff is responsible for managing countless vendors such as:

An HR consultant / attorney / CPA to help solve complex issues on a case-by-case basis, or serve as a sounding board on a given internal action

A payroll company, or outsourced payroll software

Health insurance provider

Retirement plan provider

Third party benefit administrators

Ancillary employee benefit vendor

Safety training vendor

A workers’ compensation carrier

Time and attendance vendor.

An HR Information System for cloud-based employee lifecycle management.

Suffice it to say, the “already outsourcing” list was usually a rather lengthy one. Phew, that is a lot for 1-3 people to manage!

Most business owners quickly realize that even with an internal HR component, they are already outsourcing many of their “HR” needs. Not only this, but the structure discussed above most often means internal staff is relegated to vendor management, transactional duties and implementing reactionary stop-gap measures when the need arises. A company’s existing HR team is capable of doing much more to help protect the business and increase profitability. Because this is the case, there must be better way to solve the HR challenges that all businesses face.

The better way is often to trust one professional team of subject matter experts. Rather than outsource various functions and products to multiple vendors, why not trust one team of experts that lives and breathes HR all day every day?

Now HR Can Focus On Your Greatest Asset: Your People

An existing HR employee who may have also been responsible for billing can focus on accounts receivable. Perhaps now that individual can make a few care calls to help improve client retention. Internal staff of a growing company can focus on succession planning. For one business, it may be a series of leadership development seminars, for another, it might simply be cross-training employees so that business needs are met without hiring and training new employees. Regardless, succession planning must take place in some capacity and form in order ensure the company is poised for growth should demand dictate it. Increased effort on recruiting and good hiring decisions becomes possible. With time spent on thorough applicant screening and selective hiring, turnover expense reduces.

An internal HR team can also focus on talent retention through training and leadership development. When a business owner outsources his/her human resources administrative functions, internal staff now have time to track employee satisfaction / engagement levels, long-term employee benefit strategies, and internal policies and processes that encourage efficient and compliant operations. The existing HR staff can also spend more time analyzing industry trends and benchmarking internal HR metrics to its competition.

In Conclusion...

Every business is different, and the most productive use of a current staff will vary. The areas in which a business needs outsourced help will also be different, as will the extent of assistance needed. The good news is that an HR firm equipped with the right personnel and expertise is not designed to replace existing employees. It is designed to provide them with the tools needed to do their jobs better.